WIXLIB

2/21/2014South Carolina EPC Workshop –Financing Options with FinancialInstitutions and Market OverviewGeoff Culm – SVPBanc of America Public Capital Corp – Energy ServicesFebruary 20, 20141

2/21/2014Table of ContentsSouth Carolina EPC Workshop – Financial Institution Financing OptionsEPC Financing MarketOverview . . . .3South Carolina Energy EfficiencyAct . . . .8Energy Services ‐ Economic RateTrends . . .10Benefits of Private Placement Financings with a FinancialInstitution . . . . . . .14BAPCC Energy Services Overview andTeam . . . . . . .17Contacts/Questions . . .2222

2/21/2014Energy Performance Contracting – Financing Market Overview3

2/21/2014Energy Services ‐ Markets ServedTax‐Exempt GovernmentTax‐Exempt NFPs ‐ 501 (c)3TaxableGovernmental EntitiesEducationGovernment States NFP K‐12 pprivate schools NFP private colleges and universities Federal ggovernment Local governments (cities, counties, etc.) Municipal utilities Government authorities/agencies (transitdistricts, park districts, etc.) Taxable (private use related) localgovernment transactionsInstitutions NFP cultural institutionsCommercial For profit education Waste water treatment facilities NFP health and human service organizations NFP scientific/research facilities NFP low income housingPublic EducationHealthcare Commercial housing K‐12 public schools NFP private hospitals and medical centers Public housing authorities Community colleges State colleges and universities Commercial / industrial Commercial propertiesHealthcare For profit hospitals and medicalcenters Medical office buildingsHealthcare Government owned hospitals and and medicalcenters44

2/21/2014Financing Solutions / Transaction StructuresTraditional Products Tax‐exempt or taxable lease purchase agreement (TELP) – municipal and 501(c)(3) Similar structures: Installment Financing Contract/Agreement, Acquisition Use and Security Agreement Commercial rated debt (LIS and loans) Tax/operating leases Privately placed General Obligation Bonds or Revenue Bonds Purchase of Receivables Low interest state loan programsNon‐Tax and Tax Structured Financing Energy/utility service agreements Commercial PACETax Advantaged Structures Tax Credit Obligations provide financing incentives which reduce interest costs (may be issued as bonds, leases or loans)- Qualified Zone Academy Obligations (QZABs)- New Clean Renewable Energy Obligations (NewCREBs)- Qualified Energy Conservation Obligations (QECBs)- Qualified School Construction Obligations (QSCBs) Power Purchase Agreement55

2/21/2014Qualified Energy Conservation Obligations (QECBs)QECBs ‐ 3.2BN Program ‐ Capital expenditures for: Reducing energy use in public buildings by at least 20% Implementing green community programs Rural development involving production of electricity from renewableenergy resources and research facility expenditures for certain technologies Renewable energy Allocated to the States in pproportionpto US ppopulationp, with sub‐allocations tolarge local governments (LLGs) with a population 100,000, and the reminderallocated at the discretion of the State No expiration date for allocations (will this change?) Sub‐allocations may be waived by LLGQECB Allocation By State(sample list)AL 48,364,000AR 29,623,000FL 190,146,000GA 100,484,000IN 66,155,000KY 44,291,000LA 45,759,00045 759 000MI 103,780,000MS 30,486,000MO 61,329,000NC 95,677,000SC 46,475,000TN 64,476,000OK 37,787,000 2% costs of issuance limitationsTX 252,378,000 Davis‐Bacon AppliesVA 80,600,000 No more than 30% of the allocation may be used for non‐governmentalpurposes Carry over of unused credits Only 70% of the posted tax credit may be utilized Direct Pay Option Permitted via Hiring Incentives to Restore Employment Act of2010 – “Jobs Act”66

2/21/2014Qualified Zone Academy Obligations (QZABs)QZABs 1.2BN pprogramgfor school districts (( 400MM/yr/y for 2011,, 2012,, 2013)) Proceeds to be used for public school construction and renovation, equipment purchases, training, and coursematerial development Allocated by Treasury among the states on the basis of their respective populations below the poverty line, suballocations by state 2% cost of issuance limitation applies Maximum permissible tenor determined by Treasury on a monthly basis 10% private contribution required The direct pay subsidy no longer exists for QZABs, transactions must be issued under an investor tax credit structure77

2/21/2014South Carolina Energy Efficiency Act8

2/21/2014South Carolina Energy Efficiency ActSection 48‐52‐10 Code of Laws of South Carolina ‐ Highlights Article 4: Duties of the State Energy Office Annual state energy action plan Energy Advisory Committee Article 6: Energy efficiency standards for state buildings State agencies and school districts to submit energy conservation plans and reports – annual compilation of reports Goal to reduce energy consumption for buildings in use on 7/1/08 by 20% by 7/1/20, relative to year 2000 levels Revolving loan fund Lease/purchase agreements Guaranteed energy, water, or wastewater savings contracts Annual savings from EPCs may be less than the annual payments, if aggregate savings occur as provided in terms of the contract99

2/21/2014Energy Services ‐ Economic Rate Trends10

‐055Jul‐055Apr‐0552/21/2014Market Rate UpdateRates have bounced back from their near record lows in Spring 201310 Yr T/E/ "A" G.O. Rate54.543.532.5Source: Bloomberg1111

2/21/2014Market Rate UpdateThe Yield Curve is Actually Higher and Steeper than 2012 (and 2011) and Close to 2010 LevelsUS Treasury Yield .000 000.001234567891011121314151617181920Maturity YearSource: Bloomberg1212

ket Rate UpdateCredit Spreads Continue To Exist – But Are Slightly Less Evident Than 20125.254.754.253.753.25AAA GOA GO2.752.251.75Source: Bloomberg1313

2/21/2014Benefits of Private Placement Financings with a Financial Institution14

2/21/2014Municipal Lease vs. BondsPrivate Placement LeasePublicly Issued BondVoter approval typically not requiredTypically requires voter approval or similar process (state statutesand requirements apply)Preservation of capital ‐ the leased equipment itself is usually allthat is needed to secure a lease transactionA bond is secured by either a general obligation of the municipalityor a revenue streamPayments are typically subject to appropriationG.O. or similar debt obligationsMinimal or no costs of issuanceHigher costs of issuanceClosing in 30‐60 daysClosing may be dependent upon rating review and preparation ofoffering documentsRate locks are availableRates not locked in until market sale (1‐2 weeks before closing)Can typically be prepaid on any payment date subject to theagreement termsUsually can be prepaid in 10 years1515

2/21/2014Energy Performance Contracting DiagramFinancing Example Using a Lease/Purchase AgreementThe issuer’s obligations under the Lease/Purchase Agreement are independent of the vendor’s obligations under theEnergy Performance Contracting Agreement.ESCO/VendorLenderEnergy Performance//Guaranteed SavingsContractTax‐Exempt/Taxable/Capital Lease/Purchase AgreementCustomer1616

2/21/2014BAPCC Energy Services Overview and Coverage Map17

2/21/2014About Banc of America Public Capital CorpBusiness ModelBanc of America Public Capital Corp (BAPCC), a wholly‐owned subsidiary of Bank of America N.A., serves the needs of clients in the energy, healthcare,institutions and ggovernment markets, pprovidingg integratedgresources and business capabilitiespunder one organization.gBAPCC, which includes EnergygyServices, Renewable Energy Finance, Healthcare & Institutions Finance, Government Finance, and Tax Credits, provides both taxable and tax‐exemptfinancing solutions to states, municipalities and other tax‐exempt institutions, as well as commercial and industrial companies. The team works closelywith clients to develop solutions ranging from standard financings to highly structured transactions, each tailored to a client's unique needs andobjectives.Line of BusinessClient FocusMarket CoverageDeal SizeHealthcare & Institutions FinanceMulti‐hospital systems, stand‐alone hospitals, large physician groups, multi‐specialtyphysicians groups, est. outpatient centers and hospital joint ventures (DIC’s, ASC’s,cancer centers, laboratories) and for‐profit entities; Institutions: not‐for‐profitcultural, religious and civic organizations, private and public colleges /universities,private primary/secondary schoolsGeographic focus 1MM‐ 100MMGovernment FinanceGovernmental agencies and sub‐agencies including states, cities, counties, K‐12school districts, special districts (ports, transportation, water, sewer, power andhealth), public colleges and universitiesGeographic focus 1MM‐ 100MMEnergy ServicesGeographic focusState and local governments, federal government agencies, public education, publichousing authorities, institutions, healthcare, ESCOs (Energy Services Companies),waste water treatment facilities, public utilities, cooperative utilities, commercial andindustrial 2MM‐ 100MMRenewable Energy FinanceUtilities, Independent Power Producers, project developers, equipmentmanufacturers, EPC contractors, municipalities, private equity and U.S. affiliates offoreign entities installing wind and solar projectsIndustry focus 20MM‐ 150MMTax CreditsSource of business (Originate): tax credit aggregators/syndicators, financialinstitutions (looking to sell) and developers; Investors (Distribute): banks, insurers,corporate and industrial entitiesTransaction/Geographicfocus 25MM‐ 100MM 1818

2/21/2014Energy ServicesRegional CoverageHolly Andreozzi617.434.7760Boston, MAEnergy Services OriginationsChris Giuliano,Giuliano Managing Director415.765.7381Mike Brunsman513.929.5102Cincinnati, OHGeoff Culm312.828.5319Chicago, ILChris Youngsg303.617.1290Denver, COFederalKaren Gierhart401.278.7764Providence, RI1919

2/21/2014Bank of America Merrill Lynch Overview 50B Environmental Business Initiative and Operational GoalsEnvironmental Business Goal: 50B Bank of America has established a new 10‐year, 50 billion goal toaddress climate change, demands on natural resources and advancelower‐carbon economic solutions. The new goal, effective January 1, 2013, builds on the early completionof the company’s 10‐year, 20 billion initiative announced in 2007.Operational Goals: Achieve by 2015 20% reduction in energy consumption (2004 baseline). 20% reduction in paper consumption (2010 baseline). 20% reduction in global water consumption (2010 baseline). 70% diversion of global waste from landfill. The initiative will focus on energy efficiency, renewable energy,transportation, waste and water . It will be achieved primarily through lending,lending equipment finance,financecapital markets and advisory activity, carbon finance, and advice andinvestment solutions for clients. The new initiative also earmarks 100M for grants and programrelated investments to nonprofits and community developmentfinancial institutions. 30% aggregate reduction in global GHG emissions (2004 baseline). 20% LEED certification within our corporate workplace portfolio.portfolio All paper will contain 20% post‐consumer recycled content and besourced entirely from certified forests. All electronic waste streams to be disposed of using certified,responsible vendors.2020

2/21/2014Environmental Commitment Breakdown(From original 2007 20 BN Commitment – through 2012) BAC’s EnvironmentalCommitment Through 2012has IncludedIncluded:‐ Energy efficiency financingsprovided by BAPCC EnergyServices for public sectorentities;‐ Renewable energy financingsincluding tax equityfinancing for large windprojects in the US;‐ Over 60 mln of low interestloans and grants forCommunity DevelopmentFinance Institutions forenergy efficiencyimprovements;‐ Reduction in corporatefacility green house gasemissions with a new 2010through 2015 15% reductiongoal.Breakdown of the Environmental Commitment (through 2012)2121